Will the Increase in Whiplash Claims Drive More Regulation, Higher Premiums, or Both?

Whiplash injury claims have literally become a pain in the neck in the insurance industry, costing both insurers and policyholders incalculable millions. As the difficulty of detecting fraudulent claims has increased, so too, have the levels of fraud. The weaknesses in insurers’ processes have been scrutinised and exploited by increasingly clever fraudsters who have discovered that insurers find it cheaper and easier to pay out on smaller claims, rather than investigate the possibility of deceit.

However, regulators are now starting to consider the question of whether routinely under-scrutinised pay-outs are in keeping with the rules governing Treating Customers Fairly. TCF is a cornerstone of regulation, and insurance organisations ignore it at their peril.

By routinely settling claims below a certain threshold, insurers are breaching one of the seven fundamental principles of insurance: specifically that the event which constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. By creating fraudulent claims or inflating genuine claims, control passes back to the beneficiary. Regulators are now considering whether by paying out, the insurer is deemed not to be treating other policyholders fairly, as they are required to pay higher premiums to cover the losses sustained.

How long will it be before we see fines for insurers whose policyholders shoulder the burden of whiplash claims? And if you are one of those insurers, what can be done about it?

The answer is not an easy one but it is even now being pondered by the industry’s leading players who already focus their efforts on high customer service levels, while simultaneously reducing cost.

By automating rules-based processes and applying analytics to drive staff behaviour with “next-best-action” guided decisions, insurers can drive better outcomes for all concerned (except the fraudsters). This ensures each claim case is actively and cost effectively managed in line with predetermined rules, not left to the personal judgement of a hard-pressed member of staff, scrabbling around for the information they need when challenged with a heavy caseload.

It also ensures that claims handlers can concentrate on the cases which need their scrutiny, e.g. “crash for cash” hotspots, and have the right information and “prompted actions” immediately on-screen in front of them. Also, by auto-recording of every action, they have the evidence to show they applied the right levels of scrutiny to a case before making the decision to pay.

By doing the right things (cost effectively) and being able to evidence them, while simultaneously reducing staff workloads and cost, insurers can head off this problem before the fines start rolling in – an event that inevitably will happen!